The Dow Jones Industrial Average extended its losing streak to 10 consecutive days on Wednesday, falling 1,123 points, or 2.6%, in its worst single-day performance of the year. This marked the index’s longest stretch of consecutive declines since a 1974 losing streak during Gerald Ford’s presidency.
The broader market didn’t fare much better. The S&P 500 dropped 3%, and the Nasdaq Composite tumbled 3.6%, as investors reacted to a disappointing outlook from the Federal Reserve.
Fed Dampens Market Optimism
The Federal Reserve delivered a widely anticipated quarter-point rate cut on Wednesday, but its updated projections jolted investors. The central bank indicated it now expects just two rate cuts in 2025, down from four in its September forecast. The Fed also revised its inflation outlook, predicting that inflation will remain above its target range longer than previously thought.
“The market was underwhelmed by the likely future path of interest rates,” said Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management.
Investor expectations shifted dramatically following Fed Chair Jerome Powell’s press conference. On Tuesday, traders had priced in a 98% chance of another rate cut at the Fed’s January meeting. By Wednesday afternoon, that probability plummeted to just 6%, according to fed funds futures data.
Dow Under Pressure from Key Stocks
Several key stocks in the Dow weighed heavily on its performance during this losing streak.
- UnitedHealth Group: The health insurance giant, which has dropped 15% this month, has been a significant drag on the index. Despite this, UnitedHealth shares rose 3.3% on Wednesday, offering a glimmer of relief.
- Nvidia: The AI chipmaker, which joined the Dow in November, has surged over 180% this year. However, a 5% decline over the past month has contributed to the index’s downward slide.
Despite these setbacks, the Dow remains up 14% for the year, buoyed by gains earlier in 2024.
Election Euphoria Fades
Markets initially surged following the election results, as investors welcomed a smooth transition and anticipated pro-business policies from President-elect Donald Trump. Promises of deregulation and tax cuts fueled optimism, but the Fed’s hawkish stance has tempered enthusiasm.
Jay Hatfield, CEO and CIO at Infrastructure Capital Advisors, described the Fed’s move as a “hawkish cut,” signaling that monetary conditions would remain tight despite the rate reduction.
Historical Context and Investor Sentiment
The 10-day losing streak mirrors a similar stretch in 1974, when the Dow fell for 11 straight sessions amid economic turmoil and stagflation. However, the index’s 14% gain year-to-date highlights that today’s losses come from a position of relative strength.
Still, the Fed’s cautious approach has rattled investor confidence. Powell’s acknowledgment that inflation will remain persistent has raised concerns about the pace of future rate cuts and broader economic growth.
Looking Ahead
With the Fed signaling fewer rate cuts in 2025, the market will likely remain volatile. Investors are recalibrating expectations, balancing Trump’s promises of economic growth with the reality of tighter monetary policy.
For now, the Dow’s historic losing streak underscores the challenges facing markets as they grapple with an uncertain economic and policy outlook.